Xbox 360 Costs $715 to Produce

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As yet another followup to my previous entry on the cost of producing the Xbox 360, I just ran across a story that claims that Microsoft is actually spending ~$715 on each Xbox 360. It’s hard to say how reliable this information is, as it’s attributed to an Insider Scoop article that cites “a high ranking friend at IBM, ” but if it’s anywhere near the truth, it looks like Microsoft is taking a bath on the front end when it comes to Xbox 360 sales. And for those of you that think it doesn’t matter, because they’ll just make it up on software sales and licensing, you may be right. But check out this article first.

All console makers lose money on hardware. Microsoft lost around $150 on each XBOX they sold and now they are losing more than that isn’t suprising. It is the Gillete razor concept, give away the razor and sell the blades.

Blaine, you’d be surprised. Microsoft is fighting a big gorilla in Sony and they’re trying to gain market share. The one thing Microsoft has going for them is a huge mound of cash to help fund the battle. MS is losing money on xbox, for sure, but the extent is hard to calculate.

It makes sense though… throttle the supply so you can hype it up and reduce losses until the manufacturing process costs improve.

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